Patersons analyst Jonathan Kriska agrees with the consensus that real estate prices look set to slow in the final quarter this year.

Even so, it is supply issues that drive value into the residential developers, Mr Kriska said in a client briefing.

“With positive medium-term prospects for the residential market we believe residential developers will be in the sweet spot to benefit from the tight supply," he said.

Current housing demand was running at about 200,000 dwellings annually compared to completions of 130,000, he said.

The Housing Industry Association has forecast the national housing shortage will reach 466,000 dwellings by 2020.

“Simple economics tells us that insufficient supply translates into rising prices," he said.

“While tight credit and strong population growth are important factors here, the major force behind supply shortages is Australia’s complex regulation as a result of our multi-tiered government structure."

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Company Profile

Listed property firms involved in residential development include large diversified players such as
Stockland
,
Lend Lease
,
Mirvac
and
Australand
, which have exposure in both commercial and residential markets.

Retirement assets provided good support to a stock, Mr Sundram said. “Stocks like Mirvac, Stockland, Lend Lease are all trading at a premium or close to NTA," he said.

“It’s actually hard to find value, but if you go down to the small to mid caps you will uncover players that are trading at a 40 per cent discount to NTA such as FKP, Sunland and Aevum.

We are starting to see stability in asset values across the major sectors.

“At the end of the day what is driving house prices is population growth combined with the lack of supply."

House prices and housing supply have moved to the top of the national agenda in recent weeks. At its last monthly meeting the Reserve Bank of Australia’s board discussed the factors pushing up house price growth.

The board noted “the supply of new housing was not expanding sufficiently, partly because of the land usage policies of local and state governments and also because of the tightness of finance for developers".

This week the Council of Australian Governments announced further reforms it hopes will reduce some of the planning and cost brakes on housing supply and affordability.